Friday, August 15, 2008

DotW: Going For Gold

Congratulations, Michael Phelps, on your sixth gold medal. We can only imagine the adrenaline rush as we tune in periodically from our own cube. (Kind of like the high we get writing these posts. NOT.)

But Phelps wasn't the only one turning in medal-worthy performances this week. Genentech certainly deserves at least a bronze for its neatly worded--some might even say restrained--reply to Roche's nearly $44 billion July 21 offer, which noted that the Swiss pharma "substantially undervalues the company." Go figure.

But lest you think there are hard feelings between the two companies, fear not. Charles Sanders, chair of the independent committee evaluating the offer, extended this olive branch to Severin Schwan and company: "In addition, we look forward to the company maintaining its successful relationship with Roche, regardless of ownership structure." (Certain politicos in Russia and Georgia might want to take note.)

As our sister publication The Pink Sheet Daily reports (subscription required), Genentech's response means Roche can now begin bargaining in earnest. Most analysts and industy experts expect Genentech will ultimately score gold (as in a lot more coinage). To seal the deal, Roche may have to offer upwards of $100-a-share to gain its biotech goose. The question is: can the Swiss giant still afford to feed the animal given the high cost? Or will the high price tag necessitate cost-cutting efforts that damage the high-flying culture Roche claims it's intent on preserving?

Speaking of getting air, in the high jump competition, keep your eyes on Oxford Biomedica, up more than 20% today after the beleaguered gene therapy company rejected a second takeover offer from GeneThera, and German generics play Stada, which rose 12% today on rumors of a buyout by always-acquisitive Teva Pharmaceuticals. Protherics could be the favorite to medal here, as the UK biotech was up a whopping 44% earlier in the week after it announced it was in talks with unidentified potential acquirers.

Olympic athletes know that speed isn't everything. Stamina is important too. (Imagine having the staying power to eat Michael Phelp's 12,000-calorie-a-day diet.) In our industry, the medal for stamina has to go to our favorite activist shareholder, Carl "oh yes, I can" Icahn, who bought up more shares of Biogen Idec after that biotech's stock price slipped on negative news associated with its MS drug Tysabri. Icahn's move suggests he may not be finished with the Massachusetts biotech, despite not being able to force a sale of the company roughly one year ago. (Meantime another Icahn holding, ImClone, also looks to be going for (more) gold. The company hasn't officially rejected BMS's $4.5 billion bid, but a NY Times story published August 5 suggests execs at the biotech are likely to oppose the sale at the current price.)

Your IN VIVO Blog team has stamina too. And someday we might even get a medal for the analysis we bring you week in and week out. (It won't be for the humor.) Until then, it's time for another edition of ...

AstraZeneca/Abbott: Carpe diem, says AstraZeneca’s Crestor group. It’s got a great opportunity to step-up its commercial attack on Lipitor (down about 10% in new prescription growth from a year ago) and, perhaps more importantly, Vytorin – down about 40% from a year ago, thanks to negative-sounding, albeit equivocal, data out of the ENHANCE trial and, more recently, similarly disturbing results from SEAS. Problem: AZ’s US business is sputtering, so now is not the time to add infrastructure. Meanwhile, Abbott’s big new launch, Simcor (Niaspan plus simvastatin), hasn’t tracked with expectations. So it's a perfect time for the partners who, since 2006, have been developing combinations of Crestor with Abbott’s new-generation fenofibrate (called TriLipix), to use a Crestor co-promotion to iron out, before the big test, some of the likely kinks in the joint commercialization of TriLipix/Crestor.

CSL/Talecris: Private equity took gold in this week's top bio-bucks deal. Cerberus Partners and Ampersand Ventures announced Tuesday that they were selling Talecris Biotherapeutics to the world's top maker of blood plasma products, Australia's CSL Ltd., for a hefty $3.1 billion. In addition, CSL will assume over $1 billion in debt amassed by the North Carolina player, which was started in 2005 when Ampersand and Cerberus snapped up Bayer AG's plasma products from Bayer's Biologics Products Division for $590 million. Talecris, which currently operates 56 plasma collection centres and two manufacturing facilities in the US, posted $1.2 billion in sales last year. The move by Talecris's backers has apparently been in the offing for months. Indeed Talecris may have been sniffing out M&A exits as early as last July, when it filed to go public. We've noted previously that many companies are now adopting a twin-tracking approach, entering preliminary talks with potential buyers while simultaneously filing for an IPO. Certainly given the stock-market turmoil and the lack of investors' appetite for risky IPOs, M&A was the quicker and more lucrative exit for Ampersand and Cerberus. By buying Talecris, CSL is betting the combined company will be able to capture a bigger share of the expanding market for plasma-based medicines, now a $7 billion-a-year market.

Schering-Plough/Shanghai Schering-Plough Pharmaceutical Co.: Schering-Plough caught Olympic fever, announcing this week that it has expanded its presence in China by acquiring shares of its former joint venture partners and folding them into a wholly-owned operation based in Shanghai. (Beijing is definitely too smoggy.) Financial details were not disclosed. (Clearly the Chinese already get S-P's corporate mantra: "earn trust, every day.) China has long been a focus of major pharmaceutical companies, of course. As drug pricing comes under tighter control in western countries and looming patent expiries will lower sales, the companies are looking for ways to expand into valuable developing markets such as China where an economic boom has created a thriving middle class eager to access Western medicines. AstraZeneca is among the leaders, with its Innovation Centre China, an R&D center based in Shanghai, and its strategic partnership with Peking University 3rd Hospital to open establish a Clinical Pharmacology Unit (CPU). In 2007, it took top selling honors from Pfizer in the country, increasing sales of its drugs from $85 million in 2001 to $423 million last year according to the WSJ.

Barr/BI: Barr Labs is busy showing us why Teva decided to plunk down nearly $9 billion (in cash, stock and assumed debt) to buy out its generics rival back in July. On Tuesday Barr announced agreements to settle its Mirapex (for Parkinson’s) and Aggrenox (an anticoagulant) patent challenges with Boehringer Ingelheim. Those drugs pulled in more than $700 million combined in the twelve months through May 2008, according to Barr. Not only has Barr nailed down early dates on which it can start to market its first-to-file generic versions of BI’s two drugs (2010 and 2015—10 months and 18 months earlier than the drugs’ challenged patents officially expire, respectively), it also inked a co-promotion deal with BI on Aggrenox. Barr’s Duramed division will co-promote the anticoagulant with its specialist women’s health sales force starting in March 2009 (BI will train them up in the interim), in exchange for undisclosed royalties. The two deals come not too long after Barr’s June victory in US District Court in the Mirapex litigation. That ruling found that BI had double-patented the Parkinson’s therapy, and likely forced the German company to enter into serious negotiations with Barr while it considered its appeal. Of course authorized generics deals have always seemed a bit sketchy in the eyes of Congress and the FTC, among others, so expect a thorough review.

Pfizer/Cytos: Swiss vaccines (jab-elin?) play Cytos Biotechnology this morning said it added Pfizer to its list of R&D partners. The Big Pharma is paying CHF10 million upfront and up to CHF140 million in milestones to access Cytos’ Immunodrug technology to develop vaccines against a set of predefined disease targets. Cytos will also receive research funding and potential royalties; Pfizer takes over development of any products at the preclinical stage. For Pfizer the move is the latest in a string of vaccines deals stretching back to the acquisition of PowderMed in late 2006; more recently the Big Pharma has bought Coley and inked a licensing deal with Avant for a brain cancer program in its efforts to beef up its vaccines efforts.

Thanks to Chris Morrison and Roger Longman, who pitched in with some additional reporting.

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